Working to understand the complex connections between people, cities, and environments

Day: July 16, 2010

So there’s been a debate between Joel Kotkin, who is described here as an “apologist” for the suburbs, and Chris Leinberger. Do suburbs need apologists? Is that like being an apologist for capitalism? Can I be the apologist for bacon? Bacon is sorry that it is bad for you, but it is really so delicious.

Sorry, focussing.

Chris Leinberger, who is the director of the University of Michigan real estate graduate program, whips out a tired cliche about the social sciences which makes me angry enough to want to move to the suburbs, learn to drive, buy an SUV, and do nothing but drive it all day–just to annoy him as much as this annoys me:

This happens all the time in social science research. It is best reflected in the story of a drunk who staggers out of a house late at night, dropping his keys near the front steps. He walks the 20 feet to the curb by the street light and starts looking for his keys there. A friend asks him why he is looking there since he dropped them at the front steps. The drunk replies he is looking for the keys by the curb because that is where the light is. Social scientists look for answers where the data sets are, not always where the “keys” are.

Or, alternative to what “happens all the time” in social science research, advocates trot out this tired drunk guy-keys-streetlight analogy “all the time” when they are confronted with theories and analysis that contradict their ideology. And as we all know, the absence of evidence is always reason to assume that what I think is totally right.

And you know what else is cool about whatever it is I think? There’s a silent majority that agrees with me. All. The. Time.

This analogy is insulting, tired and wrong. If Leinberger and the people he runs with don’t collect data suited to answer their research questions, that’s what we hereabouts call “bad social science research.” Yeah, it exists, sure, just like there are bad doctors. But there’s a difference between good and bad social science–and in particular, between bad and good policy analysis.

To Leinberger’s points:

There’s demographic evidence; there’s consumer research evidence; but probably the most compelling evidence is the price premium people are willing to pay to live in a walkable urban place, that the survey’s show anywhere from a 40% to 200% price premium on a price per square foot basis for a walkable urban place as oppose to a competitive near by drivable suburban place.

First of all, if housing that has amenities like sidewalks and nearby businesses and transit aren’t still going for higher prices, I’d have to start over in life because something like that would turn urban economic theory in ways I can’t fathom.

So even with the recession and price adjustments, places with amenities are still higher in price than places that don’t have amenities. OK.

And centralized locations “have a price premium” over places on the fringe. Again, OK.

These two things are pretty standard urban economic fare, and why Leinberger pronounces them like they are major new evidence about recession consequences and new markets is a bit mystifying.

Let’s try a couple of thought experiments to see why none of this walkability stuff probably has all that much to do with the recession or being underwater, in sum. What if every region were a New Urbanist dream? Absolutely everywhere in our theoretical New Urbanist region is densely populated, mixed use, walkable, and served by public transit. There is nothing but high-rise condos in this regional market. And every condo is sold in units of 1,000 square feet. If you want more, you buy more units and knock walls down.

In that case, would there be a “price premium” for walkable neighborhoods? No. Why not? For the same reason that one neighborhood doesn’t have a national defense price premium over another, or a premium for unobstructed views of Saturn’s rings. In Lamont, IA, where you can walk from one side of town to the other in 20 minutes, everybody’s got the same walkability and urban amenity set, and none of the houses carries a premium value for sidewalks. Everybody’s got sidewalks, and the 5 minute difference between your walk to the library and my walk to the library is irrelevant. Everybody has the same access or lack of access to these amenities, and thus differences in value derive from other things, like garages, fireplaces, etc.

Then in our ideal New Urbanist region where everywhere is a walkers’ paradise, let’s introduce some toxic ideas in the mix: lack of real wage growth for decades and the subsequent problem that Americans have been spending and borrowing too much for decades. Add some smart and unethical people looking for ways to make people who are actually getting poorer feel richer and come up with the idea of loosening up credit markets even more.

Let’s throw some dumb buyers in the mix and a deregulated system where dumb buyers’ risks can be passed from institution to institution, profitably.

So are suburban locations just plain inherently and essentially riskier because they aren’t walkable and don’t have that amenity value? Or did lower value land on the fringe provide both a) the opportunity to buy big houses and b) something for dumb buyers to buy, like stock for internet companies with no business plan 15 years ago?

If we had lived in a New Urbanist world with toxic lending and dumb buyers, wouldn’t we just be having the same conversation about underwater condos right on the urban growth boundary that we are having now about underwater McMansions on the urban fringe? So dumb buyers overbought land in bubble regions; couldn’t and wouldn’t they have overbought location or lofts just as easily in an ideal New Urbanist region?

It shouldn’t surprise us that places with high prices and high amenity values also have fewer problems being underwater: those are places where demand is high and supply more restricted. I could probably replicate the “walkability and foreclosures findings” with other urban amenities, like wonderful schools or golf courses. Investing in place–whether through sidewalks or design–had damn well better be reflected in home values. If not, you are supplying things that people don’t value. The fact that amenities raise home values doesn’t win you any arguments–because perhaps we’d have an even higher bump from different urban services than walking. (I actually think walking/sidewalks/mixed uses are a cheap improvement, but when we get into expensive stuff like HSR, this counterfactual becomes important.)